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An increasingly important question in iffy times. Here are the holders as of Q4, who dumped, who bought.
By Wolf Richter for WOLF STREET.
When the incredibly ballooning US national debt reached $36.22 trillion in January, it hit the “Debt Ceiling,” with which Congress prevents the government from borrowing the money needed to spend the money Congress told it to spend.
In the past, just before the government ran out of cash, Congress makes a deal with itself to raise the debt ceiling, upon which the debt spikes by hundreds of billions of dollars in just a few days as the government borrows huge amounts to refill its checking account. The flat parts followed by spikes in the chart reflect that dynamic.
These are Treasury securities that private and public entities in the US and across the world hold as interest-earning assets. The question is: Who holds this debt? And who has been buying it even as the Fed has been shedding its holdings at part of its $2.2 trillion in QT?
Who held this $36.2 trillion in Treasury securities at the end of Q4?
US Government entities: $7.34 trillion. These “intragovernmental holdings” consist of Treasury securities held by various federal civilian pension funds, military pension funds, the Social Security Trust Fund (I discussed the Social Security Trust Fund holdings, income, and outgo here), the Disability Insurance Trust Fund, the Medicare Trust Funds, and other funds. These are securities that are not traded in the market.
The “public” held the remaining $28.83 trillion in Treasury securities at the end of Q4. Most of these securities are publicly traded and their holders are spread around the US and the rest of the world.
It’s these securities “held by the public” that we’re going to look at here.
The “public” held these Treasuries, by type of security (as of the end of February, published by the Treasury Department).
Publicly traded:
- $6.4 trillion in Treasury bills (short-term securities of 1 year or less)
- $14.7 trillion in Treasury notes (2-10-year securities)
- $4.9 trillion in Treasury bonds (20-year and 30-year securities):
- $2.0 trillion in TIPS (Treasury Inflation Protected Securities):
- $0.63 trillion in Floating Rate Notes (FRN)
Not publicly traded:
- $575 billion in Treasury securities, such as the Series I Savings Bonds, Series EE Savings Bonds, etc.
Who is this “public” that holds these bonds: 30.2% are foreign holders.
Foreign entities held $8.5 trillion, or 30.2% of the publicly traded debt at the end of Q4. These holders included (Treasury Department data):
- Foreign private-sector entities: $4.73 trillion
- Foreign official entities, such as by central banks: $3.78 trillion.
They held in total:
- $7.31 trillion in long-term securities
- $1.2 trillion (14.1%) in T-bills.
That ratio of T-bills to total foreign holdings has been between 12.1% and 14.6% since mid-2020. Before the pandemic, it was in the 10% range.
But they shed securities: Foreign entities shed $166 billion of Treasury securities in Q4, or 1.9% from the record in Q3 ($8.69 trillion), led by:
- Top six financial centers (London, Belgium, Luxembourg, Switzerland, Cayman Islands, and Ireland): -$60 billion
- Japan: -$36 billion
- Brazil: -$33 billion
- India: -$28 billion
- Euro Area: -$12 billion.
But other countries added to their holdings over those three months, including Canada (+$11 billion).
The biggest foreign holders:
- The top six financial centers: $2.56 trillion (blue)
- Euro Area: $1.79 trillion, which includes three of the financial centers (green)
- Japan: $1.06 trillion (gold)
- China and Hong Kong combined: $1.01 trillion (purple).
Top 6 financial centers include US corporate holdings: $2.56 trillion, down by $60 billion from September.
US corporations hold a portion of these Treasury securities to park their overseas profits overseas, as to not have them taxed in the US. Ireland and Apple were a big example of that, as a Senate investigation in 2013 revealed.
Euro Area and China: The Euro Area – which includes the three financial centers Luxembourg, Belgium, and Ireland – has been a massive purchaser of Treasury securities over the years, even as China and Hong Kong combined have been backing away for nearly a decade. The Euro Area now holds far more than China has ever held. But over the past three months, the Euro Area shed $12 billion:
Canada has emerged as a large buyer since the pandemic, more than tripling its holdings over the past three years to $379 billion.
Other big foreign holders include Taiwan ($282 billion), India ($219 billion), Brazil ($202 billion).
Holders in the US are 69.8% of this “public”:
US mutual funds: 19.3% or about $5.5 trillion of the debt held by the public. This includes bond mutual funds and money market mutual funds, according to the Quarterly Fixed Income Report for Q4 from SIFMA (Securities Industry and Financial Markets Association).
Money market funds alone held $3.0 trillion in Treasury securities, including $2.4 trillion in T-bills.
Money market funds added $335 billion in Treasuries in Q4, amid an overall surge in money market fund balances.
Federal Reserve: 15.2% or $4.29 trillion of the debt held by the public as of the end of Q4.
Under its QT program, the Fed shed $93 billion in Treasuries in Q4. Since mid-2022, it has shed $1.53 trillion in Treasuries and $2.2 trillion in total, as of the Fed’s early March balance sheet.
US Households and nonprofit organizations: 9.5% or $2.68 trillion of the debt held by the public at the end of Q4 (Federal Reserve data). These are investors who hold Treasuries in their accounts in the US. But they shed $229 billion in Q4.
US Commercial Banks: 6.2% or $1.77 trillion of the debt held by the public at the end of Q4, (Federal Reserve data). And added $33 billion in Q4.
These banks include:
- US-chartered commercial banks: $1.54 trillion
- Foreign Banking Offices in the US: $100 billion
- Credit Unions: $63 billion
- Banks in U.S.-affiliated areas: $23 billion
US State and local governments, including pension funds: 7.3% or $2.07 trillion of the debt held by the public. They reduced their holdings by $28 billion in Q4.
US Insurance companies: 2.3% or $650 billion of the debt held by the public, including:
- Property and casualty insurance companies: $459 billion, they’ve been big buyers since the return of higher yields, nearly doubling their holdings since Q4 2022. They added another $40 billion in Q4.
- Life insurance companies: $191 billion.
Exchange traded funds: 2.0% or $554 billion of the debt held by the public.
US Private Pension funds: 1.6% or $452 billion of the debt held by the public. Shed $13 billion in Q4
US securities brokers and dealers: 1.4% or $408 billion of the debt held by the public. They added $72 billion in Q4.
Government Sponsored Enterprises: 0.8% or $227 billion of the debt held by the public. The big GSEs are Fannie Mae and Freddie Mac. They added $36 billion in Q4.
Others: $417 billion
- US nonfinancial corporate businesses: $114 billion. Does not include the Treasuries they hold in foreign financial centers (see above).
- Nonfinancial noncorporate business: $87 billion
- Holding companies: $130 billion
- Central clearing counterparties: $86 billion
Nonmarketable securities held by the public: 2.1% or $575 billion of the debt held by the public (Treasury Department data). These securities are held by the public but cannot be traded in the market and are not purchased at auctions but directly from the government. They include products for retail investors – the Series I Savings Bonds and the Series EE Savings Bonds – plus State and Local Government Series” bonds (held by state and local governments), the Government Account series bonds, and other bonds.
But there’s a new sheriff in town: “We’re focused on the real economy,” Bessent said. “Ouch,” stocks said. Where did the Trump put go? Read… Will Economic Detox Lead to a Recession? Maybe Not. But a Long Deep Stock Market Rout Will (See Dotcom Bust)
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The post Who Holds the Ballooning US Government Debt, even as the Fed and Foreign Holders Unloaded Treasury Securities in Q4? appeared first on Energy News Beat.
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